Models of Competitive Behavior
The cost of producing a megawatt of electrical energy is a function of:
- fuel price
- generation efficiency (the rate at which potential energy in the fuel is converted to electrical energy)
- operations and maintenance costs
In addition to this, generating plant incur fixed costs including:
- plant construction costs, and
- fixed operations and maintenance costs
Assuming perfect competition, the market-based price of electricity would be based purely on the cost of producing the next megawatt of power, the so-called short-run marginal cost (SRMC). This price however might not be sufficient to cover the fixed costs of generation, and thus power market prices rarely show purely SRMC pricing. In most established power markets, generators are free to offer their generation capacity at prices of their choosing. Competition and use of financial contracts keeps these prices close to SRMC, but inevitably offers price above SRMC do occur (for example during the California energy crisis of 2001).
In the context of power system simulation, a number of techniques have been applied to simulate imperfect competition in electrical power markets:
- Cournot competition
- Bertrand competition
- Supply function equilibrium
- Residual Supply Index analysis
Various heuristics have also been applied to this problem. The aim is to provide realistic forecasts of power market prices, given the forecast supply-demand situation.
Read more about this topic: Power System Simulation
Famous quotes containing the words models, competitive and/or behavior:
“The parents who wish to lead a quiet life I would say: Tell your children that they are very naughty—much naughtier than most children; point to the young people of some acquaintances as models of perfection, and impress your own children with a deep sense of their own inferiority. You carry so many more guns than they do that they cannot fight you. This is called moral influence and it will enable you to bounce them as much as you please.”
—Samuel Butler (1835–1902)
“How deep is our desire to do better than our mothers—to bring daughters into adulthood strong and fierce yet loving and gentle, adventurous and competitive but still nurturing and friendly, sweet yet sharp. We know as working women that we can’t quite have it all, but that hasn’t stopped us from wanting it all for them.”
—Anne Roiphe (20th century)
“Excessive attention, even if it’s negative, is such a powerful “reward” to a child that it actually reinforces the undesirable behavior. You need to learn restraint, to respond to far fewer situations, to ask yourself questions like, “Is this really important?” “Could I let this behavior go?” “What would happen if I just wait?” “Could I lose by doing nothing?””
—Stanley Turecki (20th century)